The environment should be the key ethical issue for all investors to consider,” said Mark Hoskin, an independent financial adviser at Holden & Partners – a UK financial planning and investment management firm specializing in ethical, environmental and socially responsible investing (SRI).
Speaking ahead of National Ethical Investment Week, May 18-24, Hoskin added: “Any fund considering itself ‘ethical’ should ensure it’s investing in companies providing solutions to environmental problems.”
A recent Holden & Partners study, Guide to Climate Change Investment, looking at the top 10 holdings of ethical and SRI funds, shows very few invest much in tackling climate change. As a result, investors in these funds, hoping to support the low-carbon economy, may find they’re predominantly buying into multinationals associated more with being part of the problem than the solution.
The study found most SRI and ethical funds’ top 10 holdings are surprisingly mainstream with names like Vodafone and Royal Bank of Scotland occurring time and again. Still, many also have holdings in large mining corporations as well as BP, Shell, Total and other oil majors.
By contrast, there are a number of “pure-play” environmental investment vehicles with 100% exposure to environmental solutions providers. These include: listed funds investing in worldwide listed stocks, such as Impax Environmental Markets Trust and Blackrock New Energy Investment Trust; AIM listed funds investing in private companies such as Low Carbon Accelerator and Ludgate Environmental Fund; and private funds available to retail investors such as Triodos Renewable Energy Fund which has 100% of its holdings in projects and companies.
“The environment is the theme of the 21st century. If ethical funds aren’t investing in the solutions to these problems, how can they claim to be ethical? Two questions that should be asked: Are they providing investors with what they were hoping for – investment in companies improving the environment and making a positive contribution to society? And are they benefiting from arguably the most exciting investment opportunity of the decade, investment in clean-tech or environmental pure-plays? Given this opportunity, environmental investment is unlikely to remain a niche for long but will evolve to become a key theme for all funds,” Hoskin said.
SRI is already a recognized and established sector, with an estimated £10 billion [US$19.55 billion] invested in retail funds and £80 billion [US$156.43 billion] in occupational pension schemes. An increased interest in the environment coupled with recognition that climate change presents a compelling business opportunity for those who can mitigate it, though, means SRI funds must be explicit in addressing climate change concerns as an ethical issue if they’re to remain competitive.
Hoskin added: “Amidst the turbulence of the credit crunch, it’s tempting to think there’s nowhere to put one’s money; property is about to crash, the stock market has crashed, bonds look risky and even the building society seems unsafe. But the growth story in environmental investment, combined with rising oil prices, concerns about energy demand growth and security, legislation and global climate change concerns make environment investment a very attractive option.”
This article is courtesy of Carbon International, a London-based PR, investor communications and fundraising consultancy specializing in environmental industries. Contact: +44 (0)20 7483 3343 or www.carboninternational.com
SRI & Ethical Investing
For more on socially responsible investing, see:
- “Sustainability Investment News: Water, Water, But Not Everywhere,” by Erik Wilkins-McKee, SocialFunds.com – www.socialfunds.com/news/article.cgi/2271.html
- “Progressive Investor Releases Report, ‘Investing in Water,’” SustainableBusiness.com – www.lohas.com/articles/100199.html
- “Socially Responsible Investing - Water Management,” Henderson Global Investors – www3.henderson.com/sites/henderson/sri/approach/topdowntheme/watermanagement.aspx
- “Investing with the Angels,” by Matthew Little, Holden & Partners – www.holden-partners.co.uk/site/461/Press.aspx